The Bank of Spain recently made public its calculations of the additional capital needed by a number of banks in order to comply with the provisions of Royal Decree-Law 2/2011 on the strengthening of the Spanish financial system. The list comprises 12 banks that must increase their capital to a total aggregated amount of €15.15 billion. However, in the opinion of certain independent analysts, Spanish banks still need much more capital.
In recent years Spanish saving banks have suffered, particularly as a result of massive lending to real estate developers during the housing boom. As an alternative way of supporting savings banks without affecting their regional nature and social character, the Spanish Central Bank set up the institutional system of protection, according to which the liquidity and credit risk of different financial institutions is shared among them.
In early 2009 Parliament approved a draft of the Payment Services Law. It will implement in Spain the EU Directive on Payment Services, the aim of which is "to establish at Community level a modern and coherent legal framework for payment services". The Spanish implementation of the directive will remove the barriers which have restricted the complete development of the Single Euro Payments Area.
In light of the current economic climate, financial entities with exposure to Spanish borrowers which are suffering the consequences of the credit crunch must analyze the resources that they have in their facility agreements and the terms under which the relevant security scheme was set in place.
The government has recently introduced rules that affect the free movement of capital directly. Order EHA/1439/2006 of the Ministry of Economy and Treasury establishes the obligation to declare cash movements of €10,000 of more when entering or leaving Spain in accordance with the EU Control of Cash Regulation, and cash movements of €100,000 or more within the Spanish territory.
The government has failed to meet the deadline for transposition of the EU Markets in Financial Instruments Directive. However, the directive will come into force for entities carrying out investment services on November 1 2007. In order to alleviate the lack of domestic regulation, the Spanish Securities and Exchange Commission is considering leaving room for self-regulation in the banking industry.
Being a compliance officer in the banking sector in Spain is becoming a tough task. In addition to the general regulations to which banks are subject, the autonomous regional governments have recently passed legislation on the use of local languages and the protection of consumers, which is applicable to financial institutions.
The legislation on anti-money laundering was recently amended in order to reflect the latest international trends regarding the prevention of money laundering and terrorist financing. Comparatively, the Spanish legislature has established stronger prevention measures than most EU member states. Moreover, Spain is actively engaged in the implementation of the recently approved EU Third Money Laundering Directive.
The Royal Decree Law 5/2005 has implemented the EU Financial Collateral Directive. This new regulation has been welcomed by the Spanish financial industry, as it gives financial players a high level of comfort when entering into the transactions covered by the decree. The new framework establishes a more flexible enforcement regime and increases legal certainty for winding-up proceedings.
In May 2005 the Madrid Provincial Court handed down a decision declaring the nullity of eight clauses that credit institutions usually include in client contracts. This ruling is significant because it is binding not only on the defendant banking institutions, but also on all financial institutions in Spain.
A Spanish court has held the bank BBVA responsible for the lack of information provided to investors when commercializing financial products involving a high degree of risk. The bank's clients had received deficient information when subscribing to non-regulated financial contracts, which the bank had denominated as 'deposits'.
With the Royal Decree Law on Productivity and Public Undertakings, Spain has finally implemented the EU Collateral Directive. The new regulation is important not only for financial entities, but also for entities in general, as it provides a simple and fast procedure for the enforcement of security financial collateral arrangements which is likely to be preferred to more formal ways of providing collateral.
In Spain, more than 60 million credit cards are held by individuals. However, contracts are not specifically regulated under Spanish law; instead, they are governed by the general conditions stipulated by the card issuers. There is thus a need to regulate legal aspects of credit card contracts in order to prevent fraudulent use - the main problem affecting electronic cards.
The advertisement of financial products is subject to stricter regulation than other advertising. The minister of economy may establish whatever regulation is necessary to ensure that advertisements of credit institutions contain all the elements needed to meet legal requirements and is able to impose a prior administrative authorization requirement.
To address the difficulties savings banks encounter in raising finance, a law on participation quotas has been passed to allow such banks to increase their equity and to improve their management. However, some have criticized the introduction on participation quotas as a first step towards the privatization of saving banks.
Consumer credit has become a competitive field in Spain, but the legal framework which regulates it is facing reform, especially at the European level. After an initial proposal was rejected by the European Parliament, discussion in Spain has centred on how to make the new regime equally attractive to credit entities and consumers alike.
A court in Madrid has declared void 10 conditions included in banking contracts. The Consumers and Users Organization had claimed that 17 conditions used by four of Spain’s leading banks were abusive to consumers. The judgment seeks to protect consumers, who are often reluctant to challenge abusive conditions in court.
A new law regulating international capital transfers and aiming to prevent money laundering was recently enacted. The law requires individuals and companies, particularly financial entities, to notify the government of capital transfers. The law also widens the scope of application of the Spanish anti-money laundering legislation and imposes obligations on a wider range of legal persons.
A new law specifically regulates preferred securities for the first time. These essentially allow Spanish and EU credit entities to obtain resources through special purpose vehicles established in Spain under a favourable tax regime. This aims to avoid the existing situation in which Spanish credit entities use special purpose vehicles situated in tax havens.
Including: Credit Institutions; Supervisory Body; Establishing a Credit Entity; Foreign Banks.